If you are an employer, regardless of the type of business structure you are operating under (sole trader, company, partnership or charity), you will likely be captured by HMRC payroll reporting requirements.
It is important to note that payroll periods for HMRC purposes run from the 6th of one month to the 5th of the next.
All amounts due to HMRC must be paid by the 22nd following the end of the tax month.
This reporting system is called the RTI system which is short for Real Time Information.
Real Time Information (RTI) was a key government programme which aims to improve the way in which employers submit Pay As you Earn (PAYE) information about their employees to HM Revenue & Customs (HMRC).
RTI requires employers to send HMRC details of employees’ payments and deductions in ‘real time’ (at or before each payment).
Under PAYE Real Time Information (RTI), employers and pension providers are required to tell HMRC in their Full Payment Submission (FPS) about Income tax, National Insurance contributions (NICs) and other payroll deductions they make, when, or before the payments to their employees or pensioners are made – the so-called ‘on-or-before’ reporting rule.
This to be sent on or before each payday, and informs HMRC about the payments and deductions for each employee.
An FPS contains:
An employer payment submission is used to report values to HMRC that cannot be included on the full payment submission (FPS). These values can affect the payments you make to HMRC on a monthly or quarterly basis.
An EPS should only be submitted in the following circumstances:
An EPS must be submitted to HMRC by the 19th of the following tax month to apply any reduction on what you will owe from your FPS. after relief provided against statutory payments the employer has made employees. Generally 90% relief is given on statutory payments made to employees.
You must give all employees a P60 at the end of each tax year, This must be issued to your employees by the 31st May following the end of the tax year.
Most payroll software packages will produce these at the end of a tax year. They can then be distributed to employees in paper format or electronically.
This summarises how much the employee has been paid during the previous tax year and how much has been deducted at source and remitted to HMRC. This is a very useful document to have if you have a sole trader business or property business in addition to being employed and need to fill out a income tax self assessment return.
Form P11D is a document used to tell HMRC about the non salary employment benefits you have provided your employees such as company cars ,medical insurance and interest free loans. This must be submitted to HMRC by the 6th of July following the end of the tax year. A copy of the P11D should also be provided to the employees covered by the P11D.
If a benefit provided to an employee in included in the regular payroll, it does not need to be disclosed in a form P11D. This is often the case with most benefits with the exception of the following:
(1) low or interest free loans and
(2) provision of living accommodation.
Employers need to pay class 1A national insurance on these benefits. This will be calculated as part of the payroll process for a tax period for benefits included within the payroll. Class 1A national insurance due on any benefits not included within the payroll and included on the form P11D must be paid by the 22nd following the end of the tax year.
Employees only pay income tax on benefits in kind and not national insurance. This is normally deducted at source if the benefit is on the payroll or recovered by HMRC by amending your PAYE code if not on the payroll.
A P45 is an official certificate that your should give to your employee when you terminate their employment with you. It will have a number of details on the document including:
This document will then be passed onto the employees new employer after they have left your employment.
A P45 comes in 4 parts. Part 1 is reported to HMRC, parts 2 and 3 are to be provided by the leaving employee to their new employer. Part 4 is for the employee to keep for their own records.
Most payroll software will have the capability of generating a P45 once a leaver has been registered as having left the employer.
A PAYE Settlement Agreement (PSA) allows you to make one annual payment to cover all the tax and National Insurance due on minor, irregular or impracticable expenses or benefits for your employees. You as an employer incur the expense and the national insurance payable on the benefits/expenses covered is known as class 1B.
If you would like to apply for a PSA, you must follow the following steps:
Anything included on a PSA does not need to be included on a P11D, form part of the regular payroll process or have class 1A national insurance employers contributions payable on them.
Any tax and class 1B national insurance should be paid to HMRC by the 22nd October following the end of the tax year.
The PAYE amount due for a tax period should be remitted to HMRC by the 22nd of the month following the end of the tax period. - this is the case If you are an employer paying HMRC monthly or quarterly.
The PAYE amount payable will include the following elements:
This only covers PAYE arising from the regular payroll process.
Employers class 1A national insurance on non payrolled benefits in kind should be paid to HMRC by the 22nd of July following the end of the tax year. Payment of tax and national insurance on items covered by a PSA must be made by the 22nd of October following the end of the tax year.
As an employer, you will have to run a number of tasks near the end of one tax y ear and the beginning of the next:
Spire Accountants can take the administrative burden of managing payroll from you. We can process your payroll so that payslips are raiseds, filings made to HMRC and the relevant entry made into your accounting records. The actual payment which would need to be made to HMRC would be made by you as the employer but we would communicate the figure to you.